TransCanada urges Alberta link to U.S. power grid

December 18, 2007 - Norval Scott - globeinvestor.com

CALGARY - TransCanada Corp. wants Alberta's electricity grid connected to the western United States, allowing producers to export electricity from the power plants they want to build in Alberta.

Alberta needs substantial new generating capacity as companies pursue projects such as new oil sands projects that consume large amounts of electricity.

Calgary-based TransCanada has positioned itself to provide some of that capacity through new natural gas and clean coal power plants, while it is also behind efforts to build the province's first nuclear plant.

Alberta's lack of transmission links, however, means companies can't send any excess production from new power plants to other markets. Building new plants without links to the United States would lead to an oversupplied provincial market, plummeting prices and little incentive for companies to invest in new generating capacity, TransCanada chief executive officer Hal Kvisle said Tuesday.

“If we were to build a really efficient power plant today that produces at low costs, it would need to be about 2,000 [megawatts] in size,” he said in an interview in TransCanada's Calgary office. “But if we brought that [plant] on line in Alberta, it would collapse the market. The power generation sector in Alberta is facing very challenging times.”

The solution, according to Mr. Kvisle, is to join Alberta's power grid with the Pacific DC Intertie system, which links the Pacific Northwest to Los Angeles. That would enable excess output from new Alberta power plants to reach buyers in a much larger and more liquid market until domestic demand grows.

TransCanada has been quietly pursuing developing a transmission project, called NorthernLights, which would join Alberta to the Intertie system. While planning is in a relatively early stage – the link is at least five years away and would cost billions of dollars to construct – the 500-kilovolt line would provide the connection Alberta needs, Mr. Kvisle said.

“The interconnect is essential if the Alberta power [system] is going to work, and if you're going to get companies like TransCanada to build big generation projects,” Mr. Kvisle said.

Last month, Bruce Power, the largest independent power generator in Ontario and partly owned by TransCanada, bought out Energy Alberta, an upstart company seeking to build Alberta's first nuclear plant, for an unknown sum. Despite that purchase, it's not a “slam dunk” that a nuclear facility is the best option for Alberta, and TransCanada will continue to evaluate generation options for the province that include new natural gas generation plants, clean coal facilities and hydropower generation on the Athabasca River, Mr. Kvisle said.

Mr. Kvisle was asked whether he expected public opinion in Alberta to be against the construction of new facilities – potentially including a nuclear plant – that would produce power for export into the United States. “That kind of thinking is very short-sighted and ill-founded,” he said. There was similar opposition when companies such as TransCanada constructed the pipelines that originally allowed Canadian gas to be exported south of the border, he added.

“The development of a gas export market has been one of the greatest successes in Canadian history,” he said. “Electricity is no different.”